1 eFX Daily colour

1.1 FX Spot

1.1.1 Overview

(Feb-11) Asian equities and US stock index futures experienced declines, while the dollar and gold saw gains, reflecting investor caution following President Donald Trump’s announcement of tariffs on US imports of steel and aluminum. The demand for haven assets pushed the dollar higher for a third consecutive session, and gold reached a new high of $2,942.68. These movements indicate that investors are finding it challenging to differentiate between the threats and actions associated with Trump’s tariffs, as well as to assess the potential impacts on global trade, corporate earnings, and inflation.

The implementation of tariffs on China has already taken place, but the uncertainty surrounding additional levies has sparked fresh concerns about the intensification of a global trade war. Trump has imposed tariffs on steel and aluminum shipments from all countries, including major suppliers Mexico and Canada, starting March 12, though he mentioned a possible exemption for Australia. Additionally, the president indicated that he would announce reciprocal tariffs on countries that tax US imports within the week.

In the currency markets, the Indian rupee strengthened by as much as 1% against the US dollar, now trading at 86.8875 (from near 88). The yen remained relatively stable at 151.88, while the pound and euro weakened by approximately 0.38% and 0.16%, respectively. The EURUSD trades at 1.0306, and GBPUSD trades at 1.2363. Against the crosses, the euro trades at 18.9877, and the pound trades at 22.7783 to the Rand.

1.1.2 US

(Feb-06) US Jobless claims rose by 11K to 219K for the week ending February 1, staying relatively low. This level is consistent with pre-Covid figures, and private employment data indicates strong hiring in January. However, despite a calm January, several major companies have announced staff reductions for early February, hinting that the quiet period may be short-lived. USDZAR saw a slight rally after this to a low of 18.5740 on a 15min window.

(Feb-10) The dollar made some inroads on a daily basis, now trading 108.19 vs friday’s close of 108.09. Gold reached a record high of 2911.04$/oz due to President Donald Trump’s plan for steel and aluminum import tariffs, causing market disruption. Both the dollar and gold rose as demand for safe-haven assets increased amid the trade threats.

(Feb-11) The risk of further tariffs still has room to boost the dollar, which has been on a more bearish trend so far this year.

1.1.3 SA

(Feb-10) There has been a fallout in relations between South Africa (SA) and the United States (US) following the introduction of the land expropriation act. Despite efforts by SA to clarify the act and provide accurate information to the US, the US has decided to halt all aid to SA while an investigation is ongoing. This decision has negatively impacted the Rand, which has lost some of its recent gains against the USD. The ZAR, which saw a low at 18.32 last Friday (07 Feb), and we opened today trading above 18.60, which is the ZAR under pressure region. Additionally, the African Growth and Opportunity Act (AGOA) is now at risk, further straining economic relations between the two countries.

  • ZAR has since made some gains, now trading below the 18.50 lvls, signalling that the market is not yet too worried about these developments.

1.1.3.1 eFX Volumes

  • Overall volumes

(Feb-10) On Friday (07-Feb) we saw a turn from balance or net short USDZAR position to being net long USDZAR from clients. (*) This is not surprising given the recent growing tensions between SA and the US.

(Feb-11) Client remain net-long USDZAR despite the Rand showing some strength in yesterdays session.

  • Price to volumes

(Feb-10) Latest implied topside is 18.65 but we could go higher if there is not indication of a de-escalation between SA and the US.

(Feb-11) ZAR has stabilized at the 60-DMA of 18.4439.

  • Liquidity hours across currency pairs
  • Currency positions

(Feb-10) Clients are now net-long USDZAR.

(Feb-11) We see continued net-long positions in ZAR.

1.1.3.2 USDZAR levels

(Feb-10) We saw the market gab in the early morning and ZAR gained some lost ground now trading at 18.41.

(Feb-11) From above, it is evident that the move lower in ZAR ended on the 6th of Feb, after that, we see ZAR range trading, without an significant move. This is a clear demonstration that the market is in a “wait and see” environment and is not ignoring the recent developments.

  • It would be premature for now to think ZAR will continue trading lower, range trading seems to be the most likely scenario and a tight range would be 18.60 - 18.35.
  • Volume weighted price for ZAR remains at 18.70.

1.1.3.3 USDZAR spreads

(Feb-10) ZAR benefits from:

  • Gold hits all time high of 2911.04
  • JSE Top 40 also trades record high at 80139.26
  • DXY trades lower compared to open. We note however that USD has made some inroads given Friday’s close was 108.04 and we were trading higher than that today.

(Feb-11) ZAR ends the day slightly stronger at 18.44 vs open at 18.4486. Spreads continue to be elevated but today we saw some moderation, perhaps at the back of reduced volumes seen today.

1.1.4 Key events this week:

  • Fed Chairman Jerome Powell gives semiannual monetary policy testimony to Senate Banking Committee, Tuesday
  • US CPI, Wednesday
  • Fed Chair Jerome Powell testifies to House Financial Services panel, Wednesday
  • UK industrial production, GDP, Thursday
  • Germany CPI, Thursday
  • Eurozone industrial production, Thursday
  • Norges Bank Governor Ida Wolden Bache gives annual address, Thursday
  • Eurozone GDP, Friday

1.2 FX Volatility Update

1.2.1 Update

By Thuto Mukena - Institutional Sales Specialist (Feb-11)

  • Overview

The Rand swiftly shrugged off weekend headlines surrounding the U.S. decision to withdraw financial aid to South Africa. Initial reaction saw USD/ZAR spike to R18.6444/$ at the open, though the pair reversed most of the move in the latter session, ultimately closing the day a touch firmer at R18.4300/$. In tandem, 1-week implied vol adjusted lower, declining by 0.49 vol p.p from open to 12.37%. Event risk was limited on the day, with markets largely in wait-and-see mode ahead of Wednesday’s U.S. CPI release. Meanwhile, Trump is also expected to provide an update on his proposed 25% import tariffs on steel and aluminum. Locally, manufacturing production figures are due, with consensus expecting an improvement from -2.6% y/y to -1.7% y/y.

  • EM & G10

1-week implied vols eased across both G10 and EM. In developed markets, USD/JPY and EUR/USD 1-week implieds led declines, dropping 178bps and 173bps, respectively. In high-beta space, USD/MXN and USD/CNH implied vols softened by 125bps and 96bps, respectively. Meanwhile, USD/INR 1-week vol closed flat as markets await further clarity on Trump’s tariff policy.

1.3 Africa

1.3.1 Update

By sizwe Mfayela - Institutional Sales Specialist (Feb-11)

  • Botswana
    • Botswana’s finance ministry expects the country’s economy to grow 3.3% in the 2025 fiscal year as a result of an expected recovery in the diamond market. The finance ministry also sees the 2025 fiscal year deficit at 7.56% of GDP vs 9% in 2024 and has proposed a 1.5% tax increase for top earners and corporates.
  • Egypt
    • Jan YoY CPI rose 24.00% vs 24.1% in Dec, whilst Core CPI rose 22.60% vs 23.2% in Dec. 
  • Ghana
    • Ghana’s finance ministry is set to meet with IMF staff to discuss the country’s 2025 budget. The discussions will include Ghana’s progress under the $3bio IMF program, the country’s reforms, and the monetary & exchange rate policies.
  • Mozambique
    • Jan YOY CPI increased to 4.7% vs 4.2% in Dec.
  • Nigeria
    • The Central Bank of Nigeria has delayed its MPC meeting initially set for 17-18 Feb and moved it to 19-20 Feb. Nigeria was also supposed to release the Jan YoY CPI numbers yesterday, which are still also delayed.
  • Senegal
    • Jan YoY CPI increased to 1.8% vs 0.3% in Dec
  • Tanzania
    • Jan YoY CPI increased 3.1% vs 3.1% in December.
  • Eurobonds
    • SSA closed spreads 2-10bps tighter.
    • A bit of a relief move yesterday, although still an eventful one, not yielding the sort of scare seen in the previous week. ETFs and real money accounts to a lesser extent were buying with the street pushing it higher on each print.
    • A relatively calm reaction to the US-SA headlines in SOAF cash and the ZAR. This contrasts with the 10-14ps widening that we saw in the morning in SAGBs. As has been the case in recent sessions, buyers came in to fade the weakness, especially with the macro backdrop being supportive. Curve closed +0.125-0.50pts and with a flattening bias.

1.3.2 Economic data

Economic data releases